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Five essential tips for blockchain startups

Mattias Hjelmstedt, CEO and Co-Founder, Utopia Music, looks at the five things entrepreneurs should know in order to run a successful blockchain startup

Mattias Hjelmstedt

March 17, 2019

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During the height of the crypto boom, everybody from Paris Hilton to the Venezuelan government seemed to be either setting up or promoting ICOs as token values skyrocketed. Even ICOs that were blatant jokes like the Useless Ethereum Token reportedly raised $200,000. Those days are over.

The crypto winter has given the blockchain sector the opportunity to step back, take stock, and mature. In this market, only blockchain firms with a solid business case and sound tokenomicswill attract investment. Here are five things you need to know to run a successful blockchain startup.

1. Think about whether you really need blockchain

Or whether your project could be implemented more efficiently with a conventional database. The most important consideration here is whether trust between users is a major concern. In a field where immutable, time-stamped records are important to all parties, like supply chain management or legal data storage — blockchain could be useful. If you plan to deploy the system internally within an organisation, a normal database would probably be better.

2. Develop a compelling value proposition

Remember that most people don’t care about blockchain technology as much as you do. Many blockchain startups fall into the trap of being too tech focussed and forgetting about the customer. A good value proposition should clearly state who your target market is and how your product will help them.

3. Create a roadmap that sets out how you will scale your project

It is great to dream big, but think about whether your user base will need to reach a critical mass before your platform is useful. If so, you will need to establish a compelling reason for early adopters to come onboard. This may involve altering your business model in the short-term to create incentives for users to adopt your technology while the user base is smaller.

4. Think about whether you really need a utility token

Or whether a security token would be more appropriate. A utility token needs to play an integral role in the future operation of your platform. Don’t try to shoehorn a utility token into a preconceived business model: if you just want to raise capital, issue a security token instead.

5. Simplify your tokenomics

The speculative bubble is over. Investors will only invest in an ICO or STO if the token is clearly linked to a useful digital service or underlying asset. Less is more: your whitepaper needs to be simple, clear and explicit about the link between the token and its underlying value.